Techniques in Procurementand itsLegal, Procedural and Regulatory Frameworkby Sanjay Kumar PandaDirector,Directorate General Of Supplies & Disposals,Ministry Of Commerce & Industry,Govt. Of India.2/8/20161

Bureaucracy in Ancient World2/8/20162

Public Procurement: Basic Architecture2/8/20163

Definition of Public Procurement

Public Procurement means acquisition by purchase, lease, license or otherwise of goods, works or services or any combination thereof, including award of Public Private Partnership Projects, by a procuring entity, whether directly or through an agency with which a contract for procurement services is entered into but does not include any acquisition of goods, works or services without consideration.2/8/20164

Definition of Goods GFR 2005

Public Procurement Bill All articles, materials, commodities, livestock, furniture, fixtures, raw materials, spares, instruments, machinery, equipment, industrial plant etc but excludes, books, publications periodicals etc for a library [Rule 131] All articles, material, commodity, livestock, furniture, fixtures, raw materials, spares, instruments, machinery, equipment, industrial plant, vehicles, aircraft, ship, railway rolling stock and includes services which are incidental or consequential to the supply of such goods such as transportation, insurance, installation, commissioning, training and maintenance [Rule 2 (i)]

2/8/20165

Definition of Works GFR 2005 Public Procurement BillOriginal Works: All new constructions, additions and alterations to existing works, special repairs to newly purchased or previously abandoned buildings or structures, including remodeling or replacementRepair Works: Works undertaken to maintain buildings and fixtures [Rule 123]

All works associated with site preparation, construction, reconstruction, demolition, repair, maintenance or renovation of buildings, installations or other structures, railways, roads, highways, ports, airports or other infrastructure; any construction project or any construction work related to excavation, drilling, installation of equipment and materials, services incidental or consequential to the works [Rule 2 (zb)]2/8/20166

Definition of Services GFR 2005 Public Procurement BillNo definitionService means any subject matter other than goods and works except those incidental or consequential to these and includes physical, maintenance, professional, intellectual, consultancy and advisory services or any other service classified or declared as such. [Rule 2 (z)] 2/8/20167

Procurement of IT Systems: Certain Definitions2/8/20168

Procurement of IT Systems: Certain Definitions2/8/20169

Procurement of IT Systems: Certain Definitions2/8/201610

Volume of Public Procurement 2/8/201611

Public Procurement vs Private ProcurementPublic Sector ProcurementPrivate Sector ProcurementDeficiencies in procurement impact on the wider economyDeficiencies in procurement shall not have the same impactOpen to public scrutinyNot open to public scrutinyVendors are selected through open bidding processProcurement through strategic sourcingProcurement is in the tactical modeProcurement is in the strategic mode

2/8/201612

Public Procurement: Role2/8/201613

Public Procurement: Role2/8/201614

Objectives of Public Procurement Fundamental objective of Public Procurement is to provide for a high velocity, transparent and economic delivery mechanism for timely delivery of goods, works and services required for implementation of various government policies and decisions in the social, healthcare, education, infrastructure sector etc, ensuring value for money 2/8/201615

Value for MoneyValue for money is the term used to assess whether or not an organization has obtained the maximum benefit from the goods/services it acquires , within the resources available to itNot only measures the cost of goods and services but also takes into account of the mix of quality, cost, fitness for purpose, timeliness and convenience to judge whether or not, when taken together, they constitute good value2/8/201616

Value for MoneyAchieving Value for Money may be described in terms of three Es Economy, Efficiency and EffectivenessEconomy: Careful use of resources to save expense, time and effortEfficiency: Delivering the same level of services for less cost, time and effortEffectiveness: Delivering a better service or getting a better return for the same amount of expense, time and effort2/8/201617

Support System of Public Procurement2/8/201618

Basic Public Procurement Policy Every authority delegated with the financial powers of procuring goods, works and services in public interest shall have the responsibility and accountability to bring efficiency, economy and transparency in matters relating to public procurement and for fair and equitable treatment of suppliers and promotion of competition in public procurement [Rule 137 of GFR 2005]2/8/201619

Public Procurement in India-Central Principles Before 1979, the Courts had not enquired as to how the power to enter into government contracts was exercised. For the first time, in the R.D.Shetty vs. International Airport Authority of India case of 1979, the Supreme Court passed the following judgment:It must, therefore, follow as a natural corollary from the principle of equity enshrined in Article 14 that though the State is entitled to refuse to enter into relationship with anyone, yet if it does so, it cannot arbitrarily choose any person it likes for entering into such relationship and discriminate between persons similarly circumstanced, but it must act in conformity with some standard or principle which meets the test of reasonableness and non-discrimination and any departure from standard or principle would be invalid unless it can be supported or justified on some rational and non-discriminatory ground2/8/201620

Central Principles of Public Procurement2/8/201621

Legal Frameworks of Public Procurement USA Federal Acquisition Regulation (FAR)EU Countries EU Laws on Public Procurement of Goods, Works and ServicesAfghanistan, Bangladesh and some other countries in Asia, Africa and Europe Procurement Law, largely on the framework of UNCITRAL Model Law on Public ProcurementChina Public Procurement Law of 2002Canada The Financial Audit Act2/8/201622

Legal Framework of Public Procurement in India 2/8/201623

Legal Framework of Public Procurement in India 2/8/201624

Legal Framework of Public Procurement in India2/8/201625

Legal framework of public procurement2/8/201626

Procedural Framework of Public ProcurementManuals on Policy and Procedure for procurement of Goods, Works and Services, issued by the GovernmentThese were drafted in conformity with the applicable procurement law and rules of the countryTo be taken as general guidelines and Ministries/Departments are to supplement these manuals by issuing detailed operating instructions. 2/8/201627

Public Procurement in India Supporting Rules/Guidelines/Acts2/8/201628

Regulatory framework of public procurement in India2/8/201629Regulatory framework

Central Vigilance CommissionStatutory organization. Apex vigilance institution free from control of any executive authority of the governmentExercises general superintendence and control over vigilance administration of all government departmentsSupervises the working of the top investigation agency of the country in all the matters of fraud and corruption including public procurementIssues guidelines for fulfillment of standards of transparency, equity, fair play etc to prevent corruption in public procurement matters

2/8/201630

Regulatory Framework of Public Procurement in India Comptroller & Auditor General

CAG is a Constitutional Authority and appointed under Articles 148 to 151 of the Constitution of India.CAG is empowered to audit (financial, compliance and performance) the appropriation and financial accounts of the Centre, State and of any other authority/body which is established by the ParliamentAudit Reports and recommendations of CAG are placed before the Parliament (Union Audit) and the legislature of the respective states (State Audit).Public Accounts Committee (PAC) of the Parliament reviews the audit reports and CAGs observations and make suitable recommendations to the ParliamentRegulatory framework2/8/201631

Regulatory Mechanism Competition Commission of India (CCI)2/8/201632

Procurement TechnologyProcurement Technology helps accelerate business improvements. It allows for the making, modification, usage, and knowledge of tools, machines, techniques, crafts, systems, or methods of organization, to solve a problem, improve a pre-existing solution, achieve a goal, or perform a specific function in relation to procurement and the procurement process.2/8/201633

Types of Procurement TechnologiesE-commerce; more specifically e-sourcing, e-procurement, e-purchasing, e-auctions, e-tender, electronic payment solutionsMarketplaces/business exchangesContract registers/databasesKnowledge portals/supplier databasesBusiness intelligence n E-invoicing/e-payables ERP (Enterprise Resource Planning) systemsMRP (Materials Resource Planning)/Inventory systemsEPOS (Electronic Point of Sale)Bar coding/RFID (Radio Frequency Identification) IntranetsExtranets2/8/201634

Benefits of TechnologyReduction of time and CostsCollaborations with suppliersAccurate and Instant information FlowsImproved Management of existing contracts, Suppliers and improved work flow managementsRisk reduction (Financial and other types of risks)Increased competition, Diversity and Inclusion TransparencyImproved audit Capabilities2/8/201635

Considerations Before Implementing New TechnologyDecide the Objective before choosing a technologyEarly Process ReengineeringStrong focus on User AdoptionInvolvement of all affected stakeholders in implementationConsider the risksDefine and reinforce metricsReturn on InvestmentAvailability of Training

2/8/201636

Best Practice Uses For TechnologyIntegration of financial system with procurement system to allow for verification of funds prior to the order release.Automated process flows for approvals.Enable the organization to receive electronic requisitions.Preparation of solicitations from requisition information.Utilization of push technology to notify potential bidders/ offerors of available opportunities.Preparation of bid tabulations and bid analysis reports. Preparation of proposal evaluation reports.Preparation and distribution of notices of award. Use of a commodity/ service code structure to group and track purchases. Automated production of purchase orders for standard inventory items.2/8/201637

ContAccumulation of usage data for contract items. Track orders released against contracts.Implementation of supplier performance reports that reflect customer satisfaction/dissatisfaction, etc. Automate recording and updates to the purchase history. Track the status of requisitions and purchase orders. Production of essential management reports and summaries. Inclusion of contract administration functionality within the technology. Use of e-commerce to source and order goods and services online. Acceptance of electronic informal quotes. Acceptance of formal competitive sealed bids.2/8/201638

ContProvide electronic catalogues to the user departments.Use of reverse auction processes for high-volume, standardized commodities. Use of online surplus auction services.Use of solicitation development software with process flow, templates, library of clauses, approval process, etc. Online posting of purchasing, award, and contract information for transparency purposes.2/8/201639

Epilogue

Ignorantia juris non excusat

2/8/201640

40